HM Revenue and Customs (HMRC) has denied suggestions that new proposals to tackle tax avoidance schemes, which seek to reduce the use of inheritance tax (IHT) through the use of trusts, will result in taxpayers having to make disputed payments upfront before they die.
A consultation document issued at the end of July by HMRC had indicated that the authority intends to broaden the range of schemes involving IHT which are subject to the disclosure of tax avoidance schemes (DOTAS) regime.
HMRC says it has evidence that some promoters are marketing IHT avoidance schemes because schemes in other tax areas have been disclosed.
There is a risk that an individual or company using a scheme which has been disclosed under DOTAS could be subject of an Accelerated Payment notice, where the taxpayer would be liable to pay any disputed tax upfront. In the case where a taxpayer uses a trust to reduce or avoid IHT, this could mean paying up before they die.
However HMRC have said that Accelerated Payment notices would not apply more widely to IHT trust charge changes, unless the trust arrangement is part of a tax avoidance scheme disclosed under DOTAS.
In a statement, HMRC said: “The government will not ask be asking taxpayers to make an accelerated payment of inheritance tax – which is due on death – during their lifetime. As part of the ongoing consultation, we are seeking views on tackling inheritance tax avoidance schemes and no final decisions have been taken.”
HMRC says its proposals would only affect a small minority of wealthy individuals actively seeking to avoid inheritance tax, adding: “Accelerated payments will not apply more widely to IHT trust charge changes, unless the trust arrangement is part of a tax avoidance scheme disclosed under DOTAS.”
There is no right of appeal against Accelerated Payment notices, however a recipient has 90 days from the receipt of the notice to send written representations objecting to the notice to HMRC but only on the grounds that the conditions for the notice were not fulfilled – e.g. the scheme was not a DOTAS scheme or that the amount of the accelerated payment claimed is incorrect.
There are penalties if you fail to pay the Accelerated Payment within 90 days of the issue of the notice.
At JW Hinks, our Lifestyle Services team can provide a comprehensive inheritance tax planning service to ensure your wealth is protected and you won’t face Accelerated Payment notices.